Since December of 2008, the Fed has kept its target interest rate at zero to 0.25 percent in an effort to reduce the cost of borrowing and help the economy recover from the Great Recession. Even so, loans held by commercial banks slid by approximately five percent in 2009. “Just as the causes for the decline in lending are multifaceted and complex and took time to evolve, the solutions will likely be equally difficult and will take time to fully work,” Duke said. She is the sole former commercial banker to serve on the Fed’s Board of Governors. “We at the Federal Reserve, meanwhile, will continue to do everything we can to encourage a return to a healthy credit environment.”

According to data released by the Federal Reserve, consumer borrowing increased in April for the first time in three months. The Fed’s Open Market Committee notes that household spending is restrained by “high unemployment, modest income growth, lower housing wealth and tight credit.” Duke said that “Just looking at the statistics, it is not hard to construct a scenario in which consumer demand for credit remains sluggish for quite a while. Household net worth dropped about 25 percent during the crisis, about 20 percent of mortgage borrowers lack equity in their homes and consumers are quite burdened by debt payments.”